The S&P 500 is up 1.2% to 2,991.77. The index has been trading almost the entire session above 3,000 points, but lost them in the final minutes of trading.
The NASDAQ 100, however, has closed negative, falling 0.26% and has dropped to 9,389.98.
The DOW JONES Ind has gained 529.95 points, 2.2%, to close at 24,995.11, and has been trading above 25,000 points for the first time since early March.
The euphoria of last week has continued these first two days of the week and begins to feel in the markets and they already know that this is not good, it usually indicates the end of the party, although nobody really knows if it will be like this or when it will end.
The IBEX 35 has managed to close again above 7,000 points, at 7,003.9, placing itself in the upper area of the side where it has boring us since last March 20. It is the index with the worst behavior of all since it has not yet been able to recover even 38% of the fall that occurred in the crash.
Relevant S&P 500 levels on daily chart
Relevant IBEX 355 levels on daily chart
The climbs are imputed to two fundamental factors: Optimism for the reopening of the US economy and expectations of getting a coronavirus vaccine soon.
Let’s play with our feet on the ground
Stock markets have been disconnected from the economy for many days, many think of an economic recovery in “V” and the reality is that this will not be the case, at least, I think so.
The reasons are several and of great weight, so it is worth remembering, at least some so that no one is misled by the current euphoria in the bags.
Trump continues to fly the flag and raise its voice against China, threatening them with tariffs, excluding Chinese companies from listing in the US, wanting to resume the Commercial War and generating phobias against the Chinese in the US and wherever it can.
See the Tweet:
“Trump is imprecise about possible sanctions against China, he says he will have more by the weekend”
The reason is simple, he wants to win the elections and he knows that going against China increases his expectations of voting in the electoral polls.
The Trade War, we know that it will splash all of us and our economies, the European in general (including the German) and the Spanish in particular are very delicate and with little sign of coming out of this crisis well. The fear is that the liquidity crisis will become a solvency crisis and the problem will become much more serious.
Already there are thousands of default notices in the USThis can be seen simply by correlation between defaults and unemployment rates, the number of Chapter 11 applications is about to flood the US
For those who may be unaware, Chapter 11 is a form of bankruptcy that involves a reorganization of a debtor’s business, debts, and assets. Businesses generally file Chapter 11 if they require time to restructure their debts.
In summary, what the graph tells us is that apart from the existing correlation between unemployment and bankruptcies, the liquidity crisis can end up turning into a solvency crisis, as I said before.
Bankruptcies threaten economies: American, European and Spanish, being the worst stop, again the Spanish.
Many think that printing money is free, that governments can do it without any problem, but nobody or rather, very few are aware that the injection of billions of dollars into the economy and doubling the balance of the FED in a few months does not have importance. It does and much more serious than printing money in a massive way is that it seems that we are not aware of the risk that this poses for the US dollar.
I’ve read economists at American universities, among others Money Money Banking professor and former Minneapolis FED president and Bloomberg columnist, that the situation is going to cause deflation, but the reality is that I think it is going to cause tremendous inflation . The inflation that the bags are having is going to end up being transferred to the shops and therefore, to all of us when we go to make the purchase. Laugh at today’s taxes, we’ll see what tomorrow’s are like and for taxes, inflation and the depreciation of fiat currencies.
The governments of the US, Japan, and many other countries are beginning to buy assets excessively and in the end, what we are most likely to find, is a very strong pressure on consumer prices that will translate into the aforementioned inflation and its consequence will again be the rise in interest rates.
Think of the tremendous unemployment and the CPI skyrocketing, interest rates on the rise …
There is much more to say, but I think that for today it is more than enough to invite you to reflect on what surrounds us and what is happening.
It is necessary to come down from the clouds and face reality as soon as possible.
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